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IMF official says U.S. Fed mindful of global impact

A general view of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst
A general view of the U.S. Federal Reserve building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

BOGOTA (Reuters) - Latin America's growth outlook is shaky and a delay in pulling back economic stimulus in the United States shows the Federal Reserve is mindful of the impact its actions can have on other countries, an International Monetary Fund official said on Wednesday.

Investors and policymakers in Latin America and other emerging markets were relieved when the U.S. Federal Reserve decided against scaling back its bond-buying program last week, for now at least.

Many fear that less-accommodative policy in the world's biggest economy will draw back capital which has flowed into developing economies in recent years, hurting markets and currencies and even economic performance.

"It's important to analyze the effects on the global economy, on global markets," Alejandro Werner, head of the IMF's Western Hemisphere department, said of the Fed's decision, adding that U.S. domestic conditions were the most important factor in the decision.

Latin America registered a "very significant" slowdown in economic expansion in the first half of the year, he said on the sidelines of a conference in Bogota, suggesting that 2013 growth might come in lower than expected.

He declined to provide specific forecasts for growth ahead of the IMF's annual meeting in October, when it will update economic projections, but said the region needed to boost productivity.

The IMF cut its growth forecasts for Latin America in July to 3 percent from 3.4 percent, blaming weaker global growth and lower commodity prices that have hit exporters like Brazil.

"In the annual meeting we will provide specific numbers but the tendency is that the growth revision is downward," Werner told reporters.

"We have seen a very significant slowdown in the first half of the year."

While Brazil was beginning to show some signs of recovery, Mexico, where the economy contracted in the second quarter, had surprised on the downside, he said. Regional economic output would likely stabilize around 3.9 percent in the coming years.

Werner was more upbeat about Colombia, which grew at an unexpectedly strong 4.2 percent in the second quarter, year-on-year. Although there were bottlenecks in infrastructure as well as human capital, Werner said the economy was "very solid" and that the financial system was "relatively healthy."

(Removes erroneous section of quote and adds summary in fourth paragraph)

(Reporting by Helen Murphy, Nelson Bocanegra and Carlos Vargas in Bogota; editing by Krista Hughes and Kenneth Barry)

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